On The Influence Of The Urban Old-age Insurance System To The Labor Supply

The establishment of the original intention of the old-age insurance system is toprotect workers’ lives after retirement, circumvent the workers’ old age risk, enableworkers to labor with no worries and play the role of a stable labor supply. With theold-age insurance system reform in China continue to deepen and the labor marketcontinues to improve, old-age insurance system is slowly showing the regularity ofthe relationship with the labor supply. Since China’s current urban old-age insurancesystem has been formally established in1997, it played a positive role in promotingeconomic development and safeguarding social stability and unity in the15years. Butthe system still has a lot of inadequacies especially in today’s new forms of labor forceand the problem becomes increasingly severe. Therefore it is necessary to improve itssystem to eliminate its hinder to promote the social progress and economicdevelopment.With the development of society, Old-age insurance system has a profoundimpact on the quality and quantity of labor supply, especially in the retirementdecisions, investment in human capital accumulation and labor mobility in the elderly.According to the work of decision theory, Pension as part of the workers income, canbe seen as a delayed payment of wages, will produce the "income effect" and the"replacement effect" on labors and combined effects the old-age retirement decisions.In the past, taking into account the employment of young people, China’s pensioninsurance system tend to enable the elderly to retire early, resulted a decline in laborforce participation rate, the reduction in the number of labor supply and financialbalance of payments imbalances and burdens. Second, with the development ofsociety, the technological level of continuous improvement and high-tech industriescontinue to emerge, the demand for highly qualified labor force is growing and theimportance of human capital have become increasingly prominent. In addition, sincethe reform and open policy, our country from the planned economy became amarket-driven economy and the industrial structure has adjusted subsequently, theurbanization process accelerated, labor mobility increased and flexible employment isgradually increased. But the fragmentation of old-age insurance system in China isserious hinder the labor mobility. This paper focuses on these problems, the analysisstarting from the theory and based on the condition of our country, discussing the China’s pension insurance system influence on labor supply. Finally, in order to betterpromote the supply of labor, improve the quality of labor supply and optimization ofhuman resources configuration, the paper proposes related countermeasures for theperfect old-age insurance system in China.